Is Wal-Mart Taking up Office Space?
Kyle is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
“The thing is, Bob, it’s not that I’m lazy, it’s that I just don’t care.” – Peter Gibbons, Office Space
Recently, Staples (NASDAQ: SPLS), shares dropped after dismal earnings results. I can recall three times in the past two years that I have stepped foot in an Office Depot (NYSE: ODP), or a Staples. I even remember each reason for the ventures into the specialty stores, and I cannot possibly fathom a future situation that might cause me to make a trip back to either. I realize that I am only one person, and even though I am quite the trendsetter, I fully respect that my feelings alone in no way constitutes a trend. But it’s definitely something to consider when researching specific stocks. Ask yourself, when is the last time you stepped foot into one of these stores? When you walked in, were you greeted? Did you receive any sort of assistance? How was the layout, was it appealing in any way? Could you count the number of recognizable personnel on one hand or two fingers?
So my trips into these establishments yielded a six-dollar purchase for an ID badge cover for my son’s high school identification card. On the first instance, I ultimately downloaded the software I needed from a website, after wasting 2 hours on trips to both locations only to find they didn’t have the software available. The second situation resulted in my actual purchase, which was a considerable contribution to the bottom line, I’m certain. After the most recent unsuccessful trip, I finally found what was needed at a crafts store.
On all but one occasion, I started and finished my search somewhere else and as I take a look at the numbers from Staples, it appears I may not be the only one. Net income for the company saw over a 31% decrease from the same quarter last year (120.4 million versus 176.4 million), resulting in a 7-cents per share decline ($.18 versus $.25 last year). Revenues have fallen for the last two quarters, dropping 5.5% this most recent quarter.
Office Depot has been abysmal this year, down over 25% and I only mention it as a cautionary note. The stock has traded in a 52-week range of $1.56-$3.81 and began the year at $2.21 per share. They will likely visit new 52-week lows similar to Staples.
Staples offers a decent dividend yield over 3%, at 44-cents per share annually, but given the recent outcomes, that’s about all the company has to offer investors. The competition in the office supply space has apparently fared better for Office Max (NYSE: OMX), as they are up 6% for 2012. But they are only 30-cents higher than when we began the year, trading in the middle of their 52-week range, $3.90-$6.45. The company pays a 1.5% dividend yield of 8-cents per share annually, but there’s much better to be had elsewhere.
With the increasing economic headwinds and the improved offerings from the big box boys, Costco, Target, and Wal-Mart (NYSE: WMT), the future in the office specialty space looks like it could use some downsizing. Wal-Mart recently established new 52-week highs, and word is out that Bill Gates snapped up 850,000 shares of the retailer. You don’t have to go by the company’s new back-to-school advertising spots, comparing receipts from competitors, simply walk into a store. So many people hate shopping there because it’s swarming with customers. But when times dictate the need to pinch a few pennies, that’s where most people go to one-stop-shop.
Wal-Mart pays loyal shareholders a decent 2.1% dividend yield, at $1.59 per share annually, and the potential for future increases aren’t at all bad. The share price should relax and take a breather off current levels fairly soon, but don’t expect them anywhere near the 52-week lows around $50 a share.
It’s perfectly fine to hate shopping at Wal-Mart, I feel your pain. And I understand the occasional desire for a less-crowded, cavernous experience at one of the office retailers. But I would prefer my investing dollars with a retailer where the aisles are too crowded and the lines are too long.
Motley Fool blogger Kyle Metivier owns no shares of any company mentioned. The Motley Fool owns shares of Staples. Motley Fool newsletter services recommend Staples. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.